Becoming a homeowner is a huge milestone, and as such, it comes with different challenges. One of them is saving for a deposit – the amount you pay upfront when buying a new home. If you’re getting onto the property ladder and need advice on saving for a house, we’re here to help.
Our guide includes top tips for saving money for a deposit, from budgeting to applying for incentives.
How much deposit do I need to buy a house?
The deposit required for a mortgage is typically 10%, but some lenders may let you buy with just 5%. This means you can take out a 95% mortgage.
As a general rule, the bigger your deposit, the better. This is because mortgages are often described in terms of ‘Loan-to-Value’ (LTV) – the percentage of the home’s value that you borrow from the bank. So, if you have a 10% deposit, your LTV would be 90%.
Having a bigger deposit means you can lower your LTV. With a lower LTV comes lower interest rates and mortgage repayments.
1. Open a savings account
The first step towards saving for your deposit is opening a savings account. You can set up a standing order so that the money comes out of your account automatically. When choosing a savings account, consider the following:
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Do you need instant access to your money?
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Could you get a better interest rate with a limited access or fixed-rate account?
2. Open a Lifetime ISA
The government’s Lifetime ISA is another great way to build up your savings. You can deposit up to £4,000 a year, and they’ll add a 25% bonus to your savings – up to £1,000 a year. You must be over 18 but under 40 to be eligible.
It’s important to note that you can only withdraw money from your Lifetime ISA if you’re:
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Buying your first home
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Aged 60 or over
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Terminally ill, with less than 12 months to live
3. Pay off any debts
It’s a good idea to pay off any debts, whether credit card bills or personal loans. This way, you can start building up your savings quickly. A clean credit record will also help you get a mortgage because lenders will trust you to make the repayments each month.
Other ways to boost your credit score include:
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Making regular payments on time
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Keeping old accounts open and demonstrating a long credit history
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Getting a credit builder card and paying the balance promptly
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Registering on the electoral roll at your current address
4. Open a savings account
Buying a house is a big financial commitment, and you may need to give up some luxuries. This doesn’t mean stopping ordering takeaways or going on holiday, but just being more considerate with your spending. For example, you could sell your car to get a cheaper one or cancel your gym membership and jog or cycle outdoors instead.
5. Boost your income
You may be surprised to discover that you could make more of what’s already at your disposal. Saving for a house deposit is a work in progress, but there are a few things you can do to maximise your total:
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Consider selling unwanted or unused items on sites like eBay, Gumtree, Depop and Vinted
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Maximise any reward or loyalty point schemes you’re signed up to
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Cash in any unused gift cards
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Freelance and share your skills, or set up an Etsy shop
6. Consider buying with your partner or friend
Another way to save money for your deposit is by buying with your partner or friend. This can speed up the process and help you access better mortgage deals, as your deposit will be bigger.
Our guide to joint ownership includes everything you need to know for a trouble-free purchase.
7. Consider buying with your partner or friend
The ‘Bank of Mum and Dad’ refers to any financial help your parents offer to support you in buying a house. The most common types of mortgages include:
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Guarantor mortgages
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Joint mortgages
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Family offset mortgages
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Joint-borrower-sole-proprietor (JBSP) mortgages
Learn more about gifted deposits in our guide.
8.Apply for a scheme
If you’re struggling to save for a deposit, consider taking advantage of our unique low-deposit schemes.
Deposit Unlock helps you buy your first home with a 5% deposit, meaning you can purchase with a 95% mortgage. It’s only available on selected newly built homes.
If your parents are helping you buy your first home, we can give you additional support via the Parent Power scheme. We’ll match the help you receive up to a maximum of 5% of the purchase price and offer an extra 1% contribution towards your flooring.
If you have a 10% deposit, we could boost it with a further 5% of the sale price, giving you a 15% deposit to work with.
Explore our new build homes across the UK, including energy-efficient 2, 3, 4 and 5 bedroom properties for all homebuyers.
Call our Sales Advisers today to reserve your property.
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